Shareholder Influence On Corporate Governance

Shareholder Influence on Corporate Governance

Assume that you wish to change the practices, authority, policies, or other characteristics of a large, for-profit corporation in Oregon (United States). However, you are not an officer, director, or shareholder of the corporation. How would you go about attempting to influence the organization to make the changes? One technique would be to buy the entire corporation. Of course, as sole owner, you could then appoint the board of directors, who would then appoint officers. If you did not like the officers, you could (at least in Oregon) remove the directors, and let the new directors know your preferences. Eventually (if not immediately), you would assemble your own team. Perhaps (better yet?) you could even decide, as sole shareholder, to appoint yourself as sole director, and then, as sole director, appoint yourself as president and treasurer. You could then surround yourself with like-minded individuals. Of course, this is not an option under most situations.

Instead, the usual option is to influence the corporation somehow. This could be done politically by influencing legislators, who could pass laws affecting corporations generally, which might have some desired specific impact on the corporation you, yourself, wish to change. It could also be done through public pressure such as the press. However, instead of the above, how about buying a single share of the organization you wish to influence? What powers would that create for you? That is this week’s assignment. Go to ORS Chapter 60 (“Private Corporations”) on the net to find out what authority you possess by holding a single share of stock. You will need to review the appropriate sections of the chapter, and identify the specific statutes that may give you some direct information or power, or at least some “hand holds” for the same. Please identify all Oregon statutes that could help you influence the corporation as a shareholder. Then, briefly describe exactly how they may assist you in your quest as a shareholder to influence the corporation.

“Influence” should be defined broadly, to include access to information, ability to “vote,” and ability to otherwise have some influence on the corporation (e.g., by voting for directors, voting as a shareholder on major actions affecting the corporation, dissolution of the corporation, and any other matter). It is expected that your paper will be approximately 3 – 5 double-spaced pages, including citations and quoted material (e.g., portions of ORS 60 that you discuss in your work).

Paper For Above instruction

Influencing a large corporation as a minority shareholder, especially with only a single share of stock, presents unique opportunities and limitations under Oregon law. The key statutes governing this influence are found in Oregon Revised Statutes (ORS) Chapter 60, which pertains to private corporations. These statutes delineate the rights, powers, and limitations of shareholders, offering various avenues to exert influence despite holding minimal ownership interest.

One of the primary statutes relevant to individual shareholders is ORS 60.557, which grants shareholders the right to vote on fundamental corporate decisions. Specifically, ORS 60.557 (1) stipulates that each share entitles the holder to one vote. Despite owning only a single share, this voting right allows an individual to participate in key decisions, such as the election of directors, approval of mergers or consolidations, sale of substantial assets, or dissolution of the corporation. However, the impact of a single vote is proportionally limited in large corporations where voting is often distributed among many shareholders. Nonetheless, exercising this right provides direct influence on the composition and strategic direction of the enterprise.

The law also affords minority shareholders certain protections and influence mechanisms through proxy voting, as outlined in ORS 60.557(2). Shareholders can appoint proxy holders to vote on their behalf, enabling even a single shareholder to leverage collective voting power if they can mobilize other shareholders or influence their proxies. This tool can be employed to sway the election of directors or other significant corporate actions without being a majority owner.

In addition to voting rights, ORS 60.571 provides shareholders with inspection rights. According to this statute, a shareholder holding at least 10% of the shares or a specified minimum number (which can be less in some cases, but generally is 10%) has the right to inspect the corporation’s books, records, and certain other documents (ORS 60.571). Although owning just a single share does not meet this threshold, other legal provisions or shareholder agreements may allow for access to information if the shareholder is part of a group or if special circumstances apply. Access to financials and internal documents enhances influence by providing critical information to inform voting decisions and advocacy.

Another possible statutory influence arises through proposals at annual meetings. ORS 60.562 permits shareholders to submit proposals for voting at the annual meeting if they meet certain ownership thresholds. While a single share typically does not meet the minimum requirements for submitting proposals independently, this right can be exercised collectively with other like-minded shareholders or through alliances. Such proposals could relate to amendments to the bylaws, policies, or other governance issues, giving shareholders a voice in the corporation’s governance.

Furthermore, Oregon law recognizes derivative actions under ORS 60.557(3). Though primarily used by shareholders to initiate litigation on behalf of the corporation, the threat of such action can compel the board to consider shareholder interests or to improve transparency. While this is a more aggressive strategy and requires legal standing, it underscores the potential influence of even minor shareholders seeking accountability.

Finally, shareholders have the right to vote on the dissolution of the corporation under ORS 60.669. While this is a significant decision requiring broad shareholder support, it illustrates the ultimate form of influence, whereby the collective will of shareholders determines the existence or termination of the corporation.

In conclusion, though holding a single share limits the scope of influence compared to majority ownership, Oregon statutes provide various legal mechanisms that enable minority shareholders to participate actively in corporate governance. Voting rights, proxy mechanisms, access to information, proposal rights, derivative actions, and dissolution voting collectively empower even minimal shareholders to exert influence, advocate for change, and ensure transparency within the corporate framework.

References

• Oregon Revised Statutes Chapter 60 - Private Corporations. (n.d.). Retrieved from https://www.oregonlegislature.gov
• Oregon Revised Statutes. (2023). ORS 60.557. Voting rights of shareholders, and other provisions.
• Oregon Revised Statutes. (2023). ORS 60.571. Inspection rights of shareholders.
• Oregon Revised Statutes. (2023). ORS 60.562. Proposal rights of shareholders.
• Oregon Revised Statutes. (2023). ORS 60.669. Dissolution of corporations.
• Clark, R. C., & Ogden, N. H. (2020). Corporate Law and Governance. West Academic Publishing.
• Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–783.
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• Roberts, R. (2018). Shareholder rights and corporate influence in the United States. American Business Law Journal, 55(3), 631-658.